Writing about random topics

Stock trading – my next steps

2011 in stock trading for me has been an incredibly easy year to make money so far. All I’ve done is sit back and do nothing and I have been making good money.

My lazy portfolio consists of 75% of my individual trading account but only accounts for 25% of my performance to date. My individual stocks are 25% of my capital but account for 75% of my gains.

There were some corrections going into 2011, some of my individual positions were down. But I have decided to measure my performance both from the time I bought the stocks as well as year-to-date – it’s just easier that way. It really is. Using the year-to-date criteria, my position in Baidu is up 34%. In Acme Packet, it is up 41% and in Netflix it is up 40% (if you don’t subscribe to Netflix, please do so you can make money for me). But the question now is that I am getting extremely paranoid. I am ever fearful of the inevitable correction that is soon to come.

You see, 2011 has been a fantastic year for stocks. I don’t think I am particularly brilliant at picking these winners, I’ve just been riding a rising tide. But I keep wanting to lock in my gains. Yet had I done so before I would have missed out on a lot more gains. I want to go out at the top even though I know it is impossible… yet I fear that a huge correction will shake me out. What do I do?

I trade better when I do nothing. That’s worked for me so far. Yet selling a winning position has always been my Achilles heel. But I’ve wondered if I should use another strategy? My girlfriend once asked me if I would tell her what trades I am doing. I replied I would have no problem with that since my trading strategy is fairly boring. If I wanted to sell my stocks, could I justify it to my girlfriend? It’s easy to justify buying. But selling?

The answer right now is no, I couldn’t justify it. My position in Netflix is going up by leaps and bounds. I want to sell. Yet if I did, I’d have to justify it to my girlfriend. On the one hand, it has gained too far too fast. Yet on the other hand, they just announced today that they are going to support streaming on Android devices. In addition, they are one of the heaviest shorted stocks which means that eventually the shorts will have to cover… and that means a lot of buying pressure which can send it up. If I were going to explain selling my position to someone who isn’t a trader, could I justify it based upon that? The answer is no; my gut feel isn’t good enough. So I stay put.

Maybe it’s a good thing my active trading is such a small component of my overall strategy. It keeps me from making too many impulsive decisions.